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Investments in power generation and higher than expected production of gold and copper are set to see Laos post economic growth of 6.4 percent for the year 2015 despite the impact of weak commodity prices and sluggish global trade, according to a World Bank report released on Monday.
With a forecast of 7 percent growth in real GDP in 2016, the bank appears bullish about the prospect of the natural resource- rich South-East Asian nation of some 7 million.
The figures were among those revealed in the bank's East Asia Pacific Economic Update which has highlighted economic trends in developing East Asia and the Pacific.
Speaking in Singapore to press assembled across the region via video link, World Bank East Asia and Pacific Region chief economist Sudhir Shetty identified China's changing growth phase, sluggish demand from Europe and pending normalization of U.S. fiscal policy as among key factors impacting Laos and a wider region.
Dr Shetty said greater investments in human capital in the form of education and training were required for Laos to nurture its service sector, including the tourist industry which has seen a boost thanks to increased arrivals from China and the Republic of Korea.
Infrastructure gaps remain an impediment to growth in Laos and across the region with a role to play for the newly formed China- led Asia Infrastructure Investment Bank (AIIB), he said.
The report also highlighted the low productivity of Laos' large rural and largely subsistence agriculture sector employing some 80 percent of the population as one of the challenges to addressing widening wealth inequality and boosting poverty reduction efforts.
While inflation in Laos remains under control thanks to low global oil prices, the impact of appreciation in the value of the U.S. currency has seen the strongly-pegged Lao kip strengthen in comparison to regional neighbors, harming competitiveness.
Other downside risks for Laos identified in the report include relatively high public debt levels and limited foreign currency reserves.
